Schrole Group Ltd - Secures First Revenues from Schrole Engage
Schrole Group Ltd
Secures first revenues from Schrole Engage
Schrole Group Limited (ASX:SCL) is an Australian software company focused on providing technology solutions to the international education and training sector. Schrole HR has a suite of five human resources Software-as-a-Service (SaaS) offerings including its core product, Schrole Connect, a SaaS-based staff recruitment platform. Schrole Group has announced it has secured the first revenues for its recently-released module Schrole Engage, with two leading international schools adding the module to their Schrole suite of HR products. Existing Schrole client, Shekou International School in Shenzhen, China, has added Schrole Engage to its Schrole HR suite, while Frankfurt International School has renewed its existing Schrole Connect contract and upgraded to Schrole Engage and Schrole Cover for the first time. As a result, Frankfurt International School’s annual SaaS spend with Schrole Group has increased 45% to $16,000. While theses initial revenues are small, they demonstrate the cross- sell and upsell potential of the expanded Schrole HR product suite and are an important step towards attaining management’s stated goal of increasing spend per school to $30,000 a year. This announcement follows a recently released presentation by the company in which it highlighted that it saw its expanded market opportunity being HR spend by international schools, not just the traditional recruitment expenditure. Our base-case valuation remains unchanged at $0.031/share.
Business model
Schrole generates revenue from the sale of subscription licences to its proprietary software modules, which are designed to provide a sophisticated recruitment and training platform for highly skilled staff within the international schools segment. SCL develops its software in- house, which enables more efficient development of the platform and new features while allowing for third-party integrations. The company has progressively added to its product suite over the past 12 months with the launch of Schrole Connect 3.0 and Schrole Events 1.0 during CY2021, and the launch of Schrole Engage 1.0 in February 2022. All Schrole HR modules are now in market, expanding up-sell and cross-sell opportunities. Over the next 12 months, additional functionality in Schrole Engage will be released, including contract management, “welcome to school” and enhanced integration of existing background checking module Schrole Verify. Schrole Engage will also be enhanced to support teacher appraisal and offboarding.
Upselling and cross-selling opportunities emerging
Schrole Group has secured two sales of its new module, Schrole Engage, within a month of releasing 1.0 of the module. The sales demonstrate the upsell and cross-sell potential of the expanded Schrole HR SaaS suite and helps shift the sales cycle away from the historically stronger second half of the calendar year when northern hemisphere international schools and many in Asia start their school year. Schrole Engage, which provides onboarding software for schools, is the fifth module in the Schrole HR SaaS suite and it follows the recent release of Schrole Events 1.0 and Schrole Connect 3.0.
Valuation of $53.5m or $0.031/share
We use the DCF methodology to value SCL (WACC 15.0%, terminal growth rate 2.2%) which derives an equity valuation of $0.031/share. We believe the growth strategy in place is sensible and deliverable, and the business has a clear runway to optimise and stabilise key sales and earnings drivers over the next 12-24 months.
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- Schrole Group Ltd - Secures First Revenues from Schrole Engage23 Mar 2022